FDIC Vs. Insurance Providers: Are You Protected?
The federal government requires banks to keep 10% of your CD in reserves. 10 cents of every dollar you’ve deposited is in your banks reserves. This goes for money market accounts as well as any money that you put in your bank account. On the other hand, state insurance commissioners regulate annuities. This creates a major difference because insurance companies have to keep 100% of your annuity. That means 1 dollar for every dollar of your investment. According to Forbes, if you wanted to take your annuity out of the insurance company and liquidate that asset, you would walk away with the current value of the annuity plus the current value of future obligations on those contracts.
Breaking It Down: What Is The FDIC Good For?
The FDIC has a coverage limit of up to $250,000 per depositor, per insured bank. If you share an investment account with your spouse, however, you split that $250,000 insurance coverage limit 50/50. FDIC does not insure your money market accounts, CD’s, annuities, stocks, bonds and any other financial instruments.
Lehman Brothers and Bear Stearns closed their doors, causing an earthquake in investor confidence. And there’s no need to go into detail of how many high-end investors had their hopes of an ROI dashed from the Bernie Madoff scandal. Consequently, the Reserve Primary Fund temporarily ensured mutual funds. Your FDIC confidence extends only as far as your dedication to what we’ve always been told, no matter how much it actually protects you. Annuity protection, more often than not, exceeds the insurance limit of the FDIC.
The New Financial Trend That Has Investors Sleeping Easy
The FDIC covers up to $250,000 if banks go belly up. But what about our annuities? State laws govern what happens to your annuities after you insurance fails and goes into liquidation. In Florida, for instance, your annuity is insured up to $300,000 for each contract owner. Annuities are guaranteed in Florida far more than your bank’s FDIC insurance is able to guarantee your CD’s and money market account and other financial instruments. How? If you and your spouse each have a contract, you are both ensured up to $600,000 together, rather than the flat $250,000 insurance that the FDIC extends. With annuities, you can maximize your coverage by investing in an annuity from multiple insurance lenders.
See my blog on how much protection your annuities have state by state in case of litigation, bankruptcy or debt collectors and creditors.
Annuities are like other financial assets. Often times, litigation efforts and creditors are able to gain access to them. As a result, the money you worked hard for is at risk.